1. Retail sales unexpectedly dropped in July and missed consensus estimates across the board. The key “control group”—a direct input for GDP—fell at the fastest pace since January 2025.

• Promotional sales events such as Amazon Prime Day occurred earlier this year, in June, pulling forward sales. The drop in July is largely a payback from those events, …

… dragging down nonstore sales.

• The retail sales diffusion index held steady.

• Here are real retail sales versus the pre-pandemic trend.

2. The University of Michigan consumer sentiment index deteriorated sharply, undershooting market expectations. The report noted that “large reductions were seen among older consumers, lower-income consumers, and those without a college degree,” who are “particularly vulnerable to any erosion of purchasing power stemming from inflation.”

• The decline was broad-based across the current conditions component …

… and the expectations component.

3. Consumers’ median inflation expectations over the next year ticked up, while the longer-term expectation held steady.

4. The Atlanta Fed’s GDPNow model is now tracking Q3 GDP at 4.3%, down from 5.8% on August 6.

• Real final sales to domestic purchasers, which remove volatile inventories and net trade, are solid at 2.7%. Excluding government spending, real final sales to private domestic purchasers are forecast at 3%.

5. This chart shows the components of GDP, averaged by decade, from the 1950s through today.

6. Professional forecasters raised near-term real GDP growth forecasts, lowered unemployment expectations, and reduced near-term inflation forecasts.

• Implied recession probability four quarters ahead fell.

7. US national debt is about to surpass $40 trillion.

• Federal debt has consistently defied CBO forecasts.